Cash Management Fundamentals Flashcards
7 cards from real CCM practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Cash Management Fundamentals flashcards as text
A controlled disbursement account notifies a company of the day's check presentments by:
Answer: Early morning of the presentment day
Controlled disbursement accounts provide an early-morning funding notification so the company can transfer only the exact amount needed to cover that day's checks.
The Baumol model for optimal cash balance is analogous to which inventory concept?
Answer: Economic Order Quantity (EOQ)
The Baumol model applies EOQ logic to cash, balancing the fixed cost of converting securities to cash against the opportunity cost of holding idle cash.
Which type of netting arrangement consolidates intercompany payments across multiple subsidiaries into a single net settlement?
Answer: Multilateral netting
Multilateral netting calculates each entity's net position against all others simultaneously, reducing the total number and value of cross-border transfers.
A company receives a large one-time payment and needs to invest it for exactly 47 days. Which instrument is most appropriate?
Answer: Term repurchase agreement
A term repurchase agreement can be structured for a specific number of days, providing a precise 47-day maturity match with minimal credit risk.
Under SWIFT's MT940 message type, what financial information is communicated?
Answer: Customer account statement (end-of-day balance and transaction detail)
MT940 is the SWIFT standard statement message transmitting end-of-day account balances and transaction details from a bank to its corporate customer.
Which risk arises when a company's bank fails before settling an intraday wire payment that has already been sent?
Answer: Herstatt (settlement) risk
Herstatt risk (a form of settlement risk) occurs when one leg of a payment settles but the counterparty fails before delivering the offsetting leg.
When evaluating short-term investment alternatives, which measure adjusts a bond-equivalent yield for the actual number of days in a year?
Answer: Effective annual rate (EAR)
The effective annual rate (EAR) compounds the periodic return to a full 365-day year, enabling true apples-to-apples comparison across instruments with different day-count conventions.